If you’d asked me at the start of the year who’d be the sacrificial lamb between Hanjin Shipping or Hyundai Merchant Marine (HMM), I’d have picked the latter every time.
Hanjin’s demise – the largest bankruptcy in container shipping history – was a result of being second in the queue for restructuring and meeting stiffer resolve from both government (chastened by the public’s mounting criticism of its billions spent to prop up ailing maritime industries) and charterers, who were determined to make an example of the line for fear that if everyone got away with what HMM had achieved in their charter negotiations they’d all be bust.
Hanjin creditors likened any fresh cash injections to “pouring water into a broken jar” as they walked away from the carrier this week. It’s arguable that “jar” had been even more cracked at HMM.
In 16 years I’ve been covering South Korean shipping the history of HMM has been far more tumultuous than Hanjin’s. Indeed, I’d go so far as to say Hanjin had decent people and systems in place. What it did not have, however, is a solid, responsible top tier of management – a criticism that can be levelled at all too many Korean conglomerates.
Also the decision by the controlling Cho family not to cave in to creditor demands and pump extra hundreds of millions of dollars into the line as demanded could be seen as tacit admission that there is no point throwing good money after bad – this container downturn is here to stay.
Summing up Hanjin’s predicament – and container shipping’s as a whole – rather neatly today, Drewry Maritime Equity Research quoted Nassim Taleb’s book Ten principles for a Black Swan-proof world: “Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.”